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Greetings, Due to my job loss in June 2009, my husband and I filed chapter 7 bankruptcy. During

Phoenix, AZ |

the process he tragically passed away (took his own life). Per my request I asked my attorney to file a motion to dismiss my case since I could pay my debt with life insurance proceeds. The court trustee refused and paid the creditors with life insurance monies. (She also received $4500, a percentage of the creditors' claims, also deducted from life insurance proceeds) . I understand that any outstanding debt is to be paid by liquid assets but what I don't understand is why the case had to move forward in bankruptcy court?, (other than her receiving a commission). Now I have a 'bankruptcy' on my credit report which is incredibly frustrating when the debt was paid with my own funds. I am in the process of disputing this with the three credit reporting agencies.

Thank you,

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Attorney answers 3


I'm sorry for your loss, but the trustee has every right to do what she did. The point of the bankruptcy proceeding was fairness to both you AND the creditors. When you filed bankruptcy, part of the bargain is that you have a trustee that is going to play a part in your financial affairs. This is the best way your estate could be settled. And the trustee does not work for free.

I understand your frustration, and again, please don't think I am insensitive to your loss, I hope simply to help you see how the process works.


My condolences to you and your family.

Chapter 7 bankruptcies cannot be voluntarily dismissed. And since it could not be voluntarily dismissed, the case had to proceed forward. The life insurance proceeds then became an asset of your bankruptcy estate, and any assets of the bankruptcy estate must be administered by the bankruptcy trustee (and of course he would take his portion of the fees).

My guess is that since the bankruptcy still went forward, you will not be successful with the credit bureau dispute.

I am sorry.


I am very sorry for your loss. Your case is one of unfortunate timing as well as unfortunate loss. Bankruptcy laws state that any inheritance, bequest, or life insurance proceeds that a debtor becomes entitled to receive within 180 days after the day the bankruptcy case was filed must be disclosed to the trustee, and that those funds then become property of the bankruptcy estate which is administered by the trustee. It doesn't happen often, but when it does there is not really any way to avoid that outcome. And yes, it stinks!
If you still have questions your lawyer should be able to answer them for you.